Over the past weekend the owners of the Schaeffler Group, Maria-Elisabeth Schaeffler and her son Georg Schaeffler, commented on the situation in a public statement which saw them deny the company gambled on the purchase of Continental AG and appeal for outside support.

“…Schaeffler Group requires support for a limited period of time. Our talks with politicians are about securing interim financial aid in a special exceptional situation for a company that is sound at the core,” the statement read, adding: “The Schaeffler Group will present a viable concept to the federal government and the states. We are well aware that the viability of this concept will be scrutinized by the responsible public authorities to ensure that an interim financial aid package will not burden the taxpayers, and we realize that the Schaeffler Group must pay the statutory interest and fees incurred due to the bridgeover.”

“We expect that it will be possible to find investors at the latest when the economic situation has recovered, and to be able to implement the strategic goals connected with the Schaeffler and Continental alliance.”

The Schaefflers’ statement continued: “We are not ‘gamblers’ who have speculated and lost. Speculation is what traders do when they bet on rising or falling share prices at the stock exchange. Our alliance with Continental has nothing at all to do with stock exchange speculation. We are no short-term oriented financial investors, but rather entrepreneurs with long-term goals and concepts…This is also in the interest of Germany as an industrial location, its innovative strength and competitiveness, its jobs and apprenticeships."

The company owners maintained that the strategic alliance between Schaeffler KG and Continental AG follows an industrial approach, which is “as appropriate today as it was in the past.” However, the following comment made it as clear as it had ever been that the company does not see the tyre and rubber unit as its core business: “The electronic expertise of Continental and the mechanical expertise of Schaeffler complement each other ideally in order to bring together two German world market leaders in an alliance capable of playing a major role in developing the automobile of the future.”

The Schaefflers continued: “The automotive industry and with it the automotive supplier industry has undergone substantial change worldwide during the past years, and this process is not concluded yet. The central challenges of the future are energy efficiency, new drive technologies and integrated system solutions from one source. Against this backdrop, the alliance with Continental is a necessary step, especially for the Schaeffler Group as a family-owned company planning for the long term. The objective is to secure the future of both companies by bringing together two German technology leaders who can play a major part in top global competition.

“To enable a rapid and sustainable solution for the benefit of both companies and their employees, we would be happy for there to be more matter-of-fact public discussions. Our family has always re-invested the profits in the company instead of withdrawing them and using them for private purposes. The Schaeffler Group has more than tripled the number of employees and its turnover since 1996 and submits more than 1,000 patent applications every year. If it had been our goal simply to add to our personal wealth, we would not have invested in the further development of the Schaeffler Group during the past 12 years and we would not have become involved with Continental. This transaction is about securing the technological basis of two German world market leaders in the long term – to the benefit of both companies and their employees, about 80,000 of whom are based in Germany.

“As has been the case in the Schaeffler Group before, we will continue to ensure the stable long-term development of the allied companies Schaeffler and Continental in the future and we will do everything in our power to prevent pointless asset stripping driven by short-term interests,” they said.

Maria-Elisabeth Schaeffler, the widow of the founder, and her son, Georg, offered to sell a stake in the 53-year-old manufacturer and yesterday said they are pushing for a rescue package from the German government. That may be the only option left after an unsuccessful search for other investors.

“They won’t find an outside investor in the current climate,” said Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen. “There are no rich Russians around, and the private equity guys have their own troubles.”

“Even if the very long-term prospects and formation of the combined group might be good, the statements from Schaeffler highlight the stressed financial situation,” Marc-Rene Tonn, a Hamburg-based analyst at M.M. Warburg, said in a note today.

Senseless Breakup
Schaeffler is seeking “temporary” aid from Chancellor Angela Merkel’s government after it failed to find investors “despite actively searching,” the Schaefflers said yesterday in a statement.

“We will do everything to prevent a senseless breakup driven by short-term interests,” said the Schaefflers, who had previously ruled out selling part of the family-owned company.

Detlef Sieverdingbeck, a spokesman for Schaeffler Group, declined to comment on how much the company is seeking to raise and how big a stake is for sale. “No reasonable option will be excluded,” he said.

The company was rebuffed in previous attempts for German aid after talks on Jan. 28, when the government called for Schaeffler to submit a “viable” business plan. The talks were led by Economy Minister Michael Glos, who resigned Feb. 7. He is being replaced by Karl-Theodor von und zu Guttenberg, 37, general secretary of the conservative Christian Social Union party. Merkel ruled out government support for Schaeffler, which needs 3 billion to 5 billion euros, Bild reported Feb. 2.

Still, the state is the company’s best chance of getting fresh capital, and the offer to part with some of the family’s wealth could help, Dudenhoeffer said.

“The government must help them,” said Dudenhoeffer, who is also managing director at research firm B&D Forecast. “If they don’t, they will irreversibly destroy a part of Germany’s industrial landscape.” (Tyres & Accessories/Staffordshire, U.K.)